Crypto Exchange Binance Resumes USDC Withdrawals, Faces Massive Withdrawals

On Tuesday, the world’s largest crypto exchange Binance decided to temporarily pause withdrawals for the USDC stablecoin citing a “token swap” matter. This came just at a time when Binance was already facing massive withdrawals a day before leading to more panic among its users.

Binance holds a very large majority of its stablecoin holdings worth $11.5 million in Paxos-issued BUSD. The company was willing to increase its USDC reserves for which it required to swap its BUSD holdings with USDC.

But any token swap into USDC would require routing the funds via a New York Bank which wasn’t yet open. Zhao explained the situation adding that this limited the exchange’s ability to process transactions. As a result, they had to temporarily pause USDC withdrawals until they completed the token swaps.

Binance chief Changpeng Zhao said: “On USDC, we have seen an increase in withdrawals. However, the channel to swap from PAX/BUSD to USDC requires going through a bank in NY in USD. The banks are not open for another few hours. We expect the situation will be restored when the banks open.“

Two days ago reports emerged that the U.S. Department of Justice (DoJ) was considering to slap criminal charges on Binance. However, the lawmakers still remain divided on initiating any action.

On Tuesday, Binance saw a record daily net outflows in terms pop the number of BTC and ETH moved. As per data from CryptoQuant, a net 40,353 Bitcoins and 278,017 Ether tokens were withdrawn from Binance yesterday. In the last three days, there have been close to $3 billion worth of net outflows from Binance.

But Binance chief Changpeng Zhao said that this is nothing unusual for the exchange. In a tweet on Tuesday, CZ noted: “Some days we have net withdrawals; some days we have net deposits. Business as usual for us. I actually think it is a good idea to “stress test withdrawals” on each CEX on a rotating basis. It costs some network fees to run these "tests". But keeps the industry healthy”.

But in his latest update, CZ said that “things seem to have stabilized” and that “deposits are coming back in”. Binance has said that by November end, it still holds more than $60 billion worth of assets across all its wallet addresses.

Last week, the crypto exchange released its Proof-of-Reserves report after a review by accounting firm Mazars. However, customers expressed dissatisfaction noting that it was not a full financial audit and doesn’t give a clear picture of Binance’s overall health.

Commenting on this, a Binance spokesperson said: “We are working collaboratively with Mazars to share all relevant financial information with them so that they can verify the accuracy of all the data we have shared as well as our process for extracting the data. We are working on getting the next update for additional tokens published as soon as possible.”